2017 guidance of $1.72 net income per diluted share and $2.09 adjusted
net income per diluted share

Molina Healthcare, Inc. (NYSE: MOH) today reported its financial results
for the fourth quarter of 2016 and announced that it is providing its
outlook and guidance for fiscal year 2017.

“While we experienced strong enrollment growth across our business and
have made progress on our cost cutting efforts, today’s results
highlight the continuing challenges we face in the ACA Marketplace,”
said J. Mario Molina, M.D., chief executive officer of Molina
Healthcare, Inc. “We are clearly disappointed in these results; however,
we have identified and are committed to taking decisive steps to
stabilize Marketplace performance; enhance our Medicaid profitability
across Illinois, Ohio and Washington; and sustain our progress in Puerto
Rico. Further, we continue to advocate for measures that the federal
government can take to level the Marketplace playing field for insurers,
like Molina, that offer effective, affordable health care to those who
need it most.”

Analysis of Our Financial Results for the Year Ended December 31, 2016

Net income per diluted share decreased to $0.14 in 2016 compared with
$2.58 in 2015. Adjusted net income per diluted share decreased to $0.50
in 2016 compared with $2.78 in 2015. The decrease in net income was
primarily the result of the declining profitability of our Marketplace
program.

Income before income taxes decreased by $185 million to $137 million in
2016 from $322 million in 2015. The significant disparity in effective
tax rates between years makes net income and diluted earnings per share
difficult to compare between 2016 and 2015. Accordingly, we believe that
loss or income before income taxes is a better comparison of our
performance between 2016 and 2015.

Financial Impact of Variances between Actual Results and Our Pricing
Model for the Marketplace Exchanges in 2016

We estimate that our loss before income taxes in 2016 from the
Marketplace program amounted to approximately $110 million, or $1.21 per
diluted share. These results are substantially lower than our
expectations based upon our 2016 pricing model. Based upon actual 2016
enrollment, our 2016 Marketplace program was priced to produce income
before income tax expense of approximately $60 million for all of 2016.
The $170 million difference in income before income tax expense between
our reported results and those we would have expected based upon our
pricing model was due to the following factors:

Risk transfer payments were approximately $325 million higher than
anticipated in our pricing. Risk transfer payments amounted to 24% of
total premium in 2016, compared with a pricing expectation of 9%.

Although medical costs were $120 million lower than anticipated by our
pricing model, we nevertheless incurred $325 million in additional
risk transfer payments noted above.

Other items increased income before income taxes by approximately $35
million compared with pricing expectations.

The difference between our actual results and those anticipated by our
pricing model was exacerbated by the federal government’s failure to pay
amounts owed to our health plans under the Marketplace risk corridor
program. We believe our health plans are owed approximately $90 million
in Marketplace risk corridor payments for 2016 dates of service, but
have not recorded any amounts associated with this claim.

The following table presents a summary of the variance in Marketplace
performance to pricing expectations for 2016 (in millions, except
per-share amounts):

Strong enrollment growth generated approximately $16.3 billion of
premium revenue, or 23% more premium revenue in 2016 compared with 2015.
Enrollment growth was primarily due to increased Marketplace enrollment
and the acquisition of Medicaid managed care membership. Consolidated
premium revenue measured on a per-member per-month (PMPM) basis
decreased approximately 4% in 2016 when compared with 2015. The decline
in PMPM premium revenue was primarily the result of lower PMPM premiums
for Medicaid Expansion membership and an increase in the percentage of
our premium revenue derived from TANF and Marketplace membership.

Medical Care Costs in 2016

The medical care ratio increased to 90.5% in 2016, from 89.1% in 2015,
due to lower Marketplace margins. The medical care ratio of our
Marketplace program increased to 93% in 2016 from 74% in 2015.

The medical care ratio of all of our programs excluding Marketplace
increased by only 40 basis points between 2015 and 2016, as decreasing
margins in Medicaid Expansion (where we saw a 500 basis point increase
in our medical care ratio) were offset by improved margins in other
programs. Consolidated medical care costs measured on a PMPM basis
decreased approximately 3% in 2016 when compared with 2015.

General and Administrative Expense in 2016

General and administrative expenses as a percentage of total revenue
(the “general and administrative expense ratio”) decreased to 7.9% in
2016, from 8.1% in 2015.

Analysis of our Financial Results for the Quarter Ended December 31,
2016

Profitability declined in the fourth quarter of 2016. Net loss per
diluted share was $1.64, compared with net income per diluted share of
$0.52 in the fourth quarter of 2015. Adjusted net loss per diluted share
was $1.54, compared with adjusted net income per diluted share of $0.58
in the fourth quarter of 2015.

The following discrete items had an adverse impact on our financial
performance in the fourth quarter of 2016:

Difficulties experienced by our Marketplace program, including a $30
million premium deficiency reserve recorded in the fourth quarter of
2016 for anticipated losses in 2017. Including this reserve, our
Marketplace program lost $130 million on a pre-tax basis in the fourth
quarter of 2016.

Adjustments to premium revenue and medical costs of approximately $25
million at our health plans that related to dates of service in 2015
or 2014.

Adjustments to premium revenue and medical costs of approximately $37
million at our health plans that related to dates of service in the
first three quarters of 2016.

Continued rate pressure in Illinois, Ohio and Washington. As discussed
below, rate increases effective January 1, 2017, in all three of these
states will provide margin relief in 2017.

The poor performance of our Marketplace program was very detrimental to
our financial performance for both the quarter and the year ended
December 31, 2016. The following table presents the fourth quarter
impact of the Marketplace and certain out-of-period items at our Health
Plans segment to our fourth quarter consolidated results (in millions,
except per-share amounts):

Quarter EndedDecember 31, 2016

Amount

Per Diluted Share (1)

Marketplace losses before income tax expense

$

(130

)

$

(1.47

)

Premium and provider adjustments recorded in the Health Plans
segment related to dates of service in 2015 or 2014

(25

)

(0.29

)

Premium and provider adjustments recorded in the Health Plans
segment related to dates of service in the first three quarters of
2016

(37

)

(0.41

)

$

(192

)

$

(2.17

)

________________________

(1)

Income tax effect calculated at the statutory tax rate of 37%.

Income Taxes in 2016

The health insurer fee that we pay to the federal government is not
deductible for purposes of determining our income tax expense. The
decrease in income before taxes in 2016 compared with 2015, combined
with the relatively large amount of reported expenses that are not
deductible for tax purposes, has resulted in an effective tax rate in
excess of 90% for the full year 2016, compared with 55.5% for 2015.
Because non-deductible expenses for the year are fixed and do not
decline relative to income or loss before income tax expense, the
substantial change in income before income taxes in the fourth quarter
is not matched by a proportional adjustment to income tax expense.
Rather, the effective tax rate we reported in the fourth quarter of 2016
represents the cumulative adjustment to our year-to-date effective tax
rate.

Molina’s 2017 Plan for Action

We have identified the following areas of focus and related actions to
execute in 2017:

1. Stabilize Marketplace Performance:

We will continue to advocate for the immediate remediation of risk
transfer methodologies that penalize comparatively efficient and
affordable health plans like ours and, by extension, those individual
consumers in need of affordable health insurance. In particular, we are
recommending that the planned change to the Marketplace risk transfer
methodology, which is currently scheduled to take effect on January 1,
2018, be brought forward in time and implemented immediately in 2017.
Had that same planned methodology change been in effect in 2016, we
estimate that our pre-tax income in 2016 would have been approximately
$70 million higher.

In January 2017, we filed suit on behalf of our health plans seeking
recovery from the federal government of approximately $52 million in
Marketplace risk corridor payments for calendar year 2015. Based upon
current estimates, we believe our health plans are also owed
approximately $90 million in Marketplace risk corridor payments from the
federal government for calendar year 2016, and a further nominal amount
for calendar year 2014. Our lawsuit seeks recovery of all of these
unpaid amounts. We have not recognized revenue, nor have we recorded a
receivable, for any amount due from the federal government for unpaid
Marketplace risk corridor payments as of December 31, 2016. We have
fully recognized all liabilities due to the federal government that we
have incurred under the Marketplace risk corridor program, and have paid
all amounts due to the federal government as required.

2. Improve Medicaid performance in Illinois, Ohio and Washington:

Inadequate premium rates limited profitability in Illinois, Ohio and
Washington in 2016. Effective January 1, 2017, we received blended rate
increases of approximately 5% in Illinois, 4% in Ohio and 4% in
Washington. We expect improved profitability in all three plans in 2017
as a result of these rate increases and company-wide cost containment
measures.

3. Sustain the improvements achieved in Puerto Rico:

Results at our Puerto Rico health plan have improved in the second half
of 2016, primarily as a result of management actions undertaken
beginning in the spring of 2016. We expect that the benefit of those
actions to continue into 2017.

Conference Call

Management will host a conference call and webcast to discuss Molina
Healthcare’s fourth quarter and year-end results at 5:00 p.m. Eastern
time on Wednesday, February 15, 2017. The number to call for the
interactive teleconference is (212) 231-2922. A telephonic replay of the
conference call will be available from 7:00 p.m. Eastern time on
Wednesday, February 15, 2017, through 6:00 p.m. Eastern Time on
Thursday, February 16, 2016, by dialing (800) 633-8284 and entering
confirmation number 21842012. A live audio broadcast of Molina
Healthcare’s conference call will be available on our website, molinahealthcare.com.
A 30-day online replay will be available approximately an hour following
the conclusion of the live broadcast.

2017 Business Outlook and Investor Meeting

As has been our past practice, we will discuss our 2017 business outlook
and strategy at our Investor Day Conference webcast and presentation to
be held on February 16, 2017, at the Le Parker Meridien Hotel in New
York City from 12:30 p.m. to 4:30 p.m. Eastern Time. The Company will
webcast the presentations offered by its management team, which will be
followed by question-and-answer sessions. A 30-day online replay of the
Investor Day meeting will be available approximately one hour following
the conclusion of the live webcast. A link to this webcast can be found
on the Company’s website at molinahealthcare.com

About Molina Healthcare

Molina Healthcare, Inc., a FORTUNE 500 company, provides managed health
care services under the Medicaid and Medicare programs and through the
state insurance marketplaces. Through our locally operated health plans
in 12 states across the nation and in the Commonwealth of Puerto Rico,
Molina currently serves approximately 4.2 million members. Dr. C. David
Molina founded our company in 1980 as a provider organization serving
low-income families in Southern California. Today, we continue his
mission of providing high quality and cost-effective health care to
those who need it most. For more information about Molina Healthcare,
please visit our website at molinahealthcare.com.

Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995: This earnings release contains “forward-looking
statements” regarding our plans, expectations, and anticipated future
events. Actual results could differ materially due to numerous known and
unknown risks and uncertainties. Those known risks and uncertainties
include, but are not limited to, the following:

the success of our profit improvement and cost-cutting initiatives;

the numerous political and market-based uncertainties associated
with the Affordable Care Act (the “ACA”) or “Obamacare,” including any
potential repeal and replacement of the law, amendment of the law, or
move to state block grants for Medicaid;

the market dynamics surrounding the ACA Marketplaces, including but
not limited to uncertainties associated with risk transfer
requirements, the potential for disproportionate enrollment of higher
acuity members, the withdrawal of cost sharing subsidies and/or
premium tax credits, the adequacy of agreed rates, and potential
disruption associated with market withdrawal;

subsequent adjustments to reported premium revenue based upon
subsequent developments or new information, including changes to
estimated amounts payable or receivable related to Marketplace risk
adjustment/risk transfer, risk corridors, and reinsurance;

management of our medical costs, including our ability to reduce
over time the high medical costs commonly associated with new patient
populations;

our ability to predict with a reasonable degree of accuracy
utilization rates, including utilization rates in new plans,
geographies, and programs where we have less experience with patient
and provider populations, and also including utilization rates
associated with seasonal flu patterns or other newly emergent diseases;

significant budget pressures on state governments and their
potential inability to maintain current rates, to implement expected
rate increases, or to maintain existing benefit packages or membership
eligibility thresholds or criteria, including the resolution of the
Illinois budget impasse and continued payment of all amounts due to
our Illinois health plan;

the success of our efforts to retain existing government contracts,
including those in Illinois, Washington, Florida, Texas, and New
Mexico, and to obtain new government contracts in connection with
state requests for proposals (RFPs) in both existing and new states;

our ability to consummate and realize benefits from acquisitions,
and to integrate acquisitions;

our receipt of adequate premium rates to support increasing
pharmacy costs, including costs associated with specialty drugs and
costs resulting from formulary changes that allow the option of
higher-priced non-generic drugs;

our ability to operate profitably in an environment where the trend
in premium rate increases lags behind the trend in increasing medical
costs;

the Medicaid expansion cost corridors in New Mexico and Washington,
and any other retroactive adjustment to revenue where methodologies
and procedures are subject to interpretation or dependent upon
information about the health status of participants other than Molina
members;

the interpretation and implementation of at-risk premium rules and
state contract performance requirements regarding the achievement of
certain quality measures, and our ability to recognize revenue amounts
associated therewith;

cyber-attacks or other privacy or data security incidents resulting
in an inadvertent unauthorized disclosure of protected health
information;

the success of our health plan in Puerto Rico, including the
resolution of the Puerto Rico debt crisis, payment of all amounts due
under our Medicaid contract, the effect of the PROMESA law, and our
efforts to better manage the health care costs of our Puerto Rico
health plan;

the success and renewal of our duals demonstration programs in
California, Illinois, Michigan, Ohio, South Carolina, and Texas;

the accurate estimation of incurred but not reported or paid
medical costs across our health plans;

efforts by states to recoup previously paid and recognized premium
amounts;

the continuation and renewal of the government contracts of our
health plans, Molina Medicaid Solutions, and Pathways, and the terms
under which such contracts are renewed;

complications, member confusion, or enrollment backlogs related to
the annual renewal of Medicaid coverage;

government audits and reviews, or potential investigations, and any
fine, sanction, enrollment freeze, monitoring program, or premium
recovery that may result therefrom;

changes with respect to our provider contracts and the loss of
providers;

approval by state regulators of dividends and distributions by our
health plan subsidiaries;

changes in funding under our contracts as a result of regulatory
changes, programmatic adjustments, or other reforms;

high dollar claims related to catastrophic illness;

the favorable resolution of litigation, arbitration, or
administrative proceedings;

the relatively small number of states in which we operate health
plans;

the availability of adequate financing on acceptable terms to fund
and capitalize our expansion and growth, repay our outstanding
indebtedness at maturity and meet our liquidity needs, including the
interest expense and other costs associated with such financing;

our failure to comply with the financial or other covenants in our
credit agreement or the indentures governing our outstanding notes;

the sufficiency of our funds on hand to pay the amounts due upon
conversion of our outstanding notes;

the failure of a state in which we operate to renew its federal
Medicaid waiver;

increases in government surcharges, taxes, and assessments,
including but not limited to the deductibility of certain compensation
costs;

newly emergent viruses or widespread epidemics, public catastrophes
or terrorist attacks, and associated public alarm;

increasing competition and consolidation in the Medicaid industry;

and numerous other risk factors, including those discussed in our
periodic reports and filings with the Securities and Exchange
Commission. These reports can be accessed under the investor relations
tab of our website or on the SEC’s website at sec.gov. Given
these risks and uncertainties, we can give no assurances that our
forward-looking statements will prove to be accurate, or that any other
results or events projected or contemplated by our forward-looking
statements will in fact occur, and we caution investors not to place
undue reliance on these statements. All forward-looking statements in
this release represent our judgment as of February 15, 2017, and we
disclaim any obligation to update any forward-looking statements to
conform the statement to actual results or changes in our expectations.

General and administrative expense ratio represents general and
administrative expenses as a percentage of total revenue. Net profit
margin represents net (loss) income as a percentage of total revenue.

A member month is defined as the aggregate of each month’s ending
membership for the period presented.

(2)

The MCR represents medical costs as a percentage of premium revenue.

MOLINA HEALTHCARE, INC.

UNAUDITED SELECTED HEALTH PLANS SEGMENT FINANCIAL DATA

(In millions, except percentages and per-member per-month amounts)

The following tables provide the details of our medical care
costs for the periods indicated:

Three Months Ended December 31,

2016

2015

Amount

PMPM

% of

Total

Amount

PMPM

% of

Total

Fee for service

$

2,837

$

223.43

73.8

%

$

2,297

$

220.34

71.5

%

Pharmacy

592

46.57

15.4

449

43.08

14.0

Capitation

317

24.93

8.2

257

24.69

8.0

Direct delivery

23

1.80

0.6

43

4.14

1.3

Other

75

5.95

2.0

167

16.06

5.2

$

3,844

$

302.68

100.0

%

$

3,213

$

308.31

100.0

%

Year Ended December 31,

2016

2015

Amount

PMPM

% of

Total

Amount

PMPM

% of

Total

Fee for service

$

10,993

$

217.84

74.4

%

$

8,572

$

218.35

72.7

%

Pharmacy

2,213

43.84

15.0

1,610

41.01

13.7

Capitation

1,218

24.13

8.2

982

25.02

8.3

Direct delivery

78

1.55

0.5

128

3.26

1.1

Other

272

5.39

1.9

502

12.79

4.2

$

14,774

$

292.75

100.0

%

$

11,794

$

300.43

100.0

%

The following table provides the details of our medical claims and
benefits payable as of the dates indicated:

December 31,

2016

2015

Fee-for-service claims incurred but not paid (IBNP)

$

1,352

$

1,191

Pharmacy payable

112

88

Capitation payable

37

140

Other (1)

428

266

$

1,929

$

1,685

________________________

(1)

“Other” medical claims and benefits payable include amounts payable
to certain providers for which we act as an intermediary on behalf
of various state agencies without assuming financial risk. Such
receipts and payments do not impact our consolidated statements of
income. As of December 31, 2016 and 2015, we had recorded non-risk
provider payables of approximately $225 million and $167 million,
respectively.

Our claims liability includes a provision for adverse claims deviation
based on historical experience and other factors including, but not
limited to, variations in claims payment patterns, changes in
utilization and cost trends, known outbreaks of disease, and large
claims. Our reserving methodology is consistently applied across all
periods presented. The amounts displayed for “Components of medical care
costs related to: Prior period” represent the amount by which our
original estimate of claims and benefits payable at the beginning of the
period were more than the actual amount of the liability based on
information (principally the payment of claims) developed since that
liability was first reported. The following table presents the
components of the change in medical claims and benefits payable for the
periods indicated:

Year Ended December 31,

2016

2015

Medical claims and benefits payable, beginning balance

$

1,685

$

1,201

Components of medical care costs related to:

Current period

14,966

11,935

Prior period

(192

)

(141

)

Total medical care costs

14,774

11,794

Change in non-risk provider payables

58

48

Payments for medical care costs related to:

Current period

13,296

10,448

Prior period

1,292

910

Total paid

14,588

11,358

Medical claims and benefits payable, ending balance

$

1,929

$

1,685

Benefit from prior period as a percentage of:

Balance at beginning of period

11.4

%

11.8

%

Premium revenue, trailing twelve months

1.2

%

1.1

%

Medical care costs, trailing twelve months

1.3

%

1.2

%

Fee-For-Service Claims Data: (1)

Days in claims payable, fee for service (2)

47

48

Number of members at end of year

4,227,000

3,533,000

Number of claims in inventory at end of year

554,700

380,800

Billed charges of claims in inventory at end of year

$

1,307

$

816

Claims in inventory per member at end of year

0.13

0.11

Billed charges of claims in inventory per member at end of year

$

309.09

$

230.91

Number of claims received during the year

53,360,600

40,173,300

Billed charges of claims received during the year

$

64,388

$

46,211

________________________

(1)

Claims data includes inpatient and outpatient claims only. Pharmacy
and other claims are not included.

(2)

Claims payable at December 31, 2016 includes IBNP and $94 million of
fee-for-service payables included in “Other” medical claims and
benefits payable.

MOLINA HEALTHCARE, INC.UNAUDITED NON-GAAP FINANCIAL
MEASURES

We use non-GAAP financial measures as supplemental metrics in evaluating
our financial performance, making financing and business decisions, and
forecasting and planning for future periods. For these reasons,
management believes such measures are useful supplemental measures to
investors in comparing our performance to the performance of other
public companies in the health care industry. These non-GAAP financial
measures should be considered as supplements to, and not as substitutes
for or superior to, GAAP measures. See further information regarding
non-GAAP measures below the tables.

Three Months EndedDecember 31,

Year EndedDecember 31,

2016

2015

2016

2015

(In millions)

Net (loss) income

$

(91

)

$

30

$

8

$

143

Adjustments:

Depreciation, and amortization of intangible assets and capitalized
software

43

33

161

120

Interest expense

25

21

101

66

Income tax (benefit) expense

(8

)

26

129

179

EBITDA

$

(31

)

$

110

$

399

$

508

Three Months Ended December 31,

Year Ended December 31,

2016

2015

2016

2015

(In millions, except per diluted share amounts)

Amount

Pershare

Amount

Pershare

Amount

Pershare

Amount

Pershare

Net (loss) income

$

(91

)

$

(1.64

)

$

30

$

0.52

$

8

$

0.14

$

143

$

2.58

Adjustment:

Amortization of intangible assets

8

0.16

5

0.09

32

0.57

18

0.32

Income tax effect (1)

(3

)

(0.06

)

(2

)

(0.03

)

(12

)

(0.21

)

(7

)

(0.12

)

Amortization of intangible assets, net of tax effect

5

0.10

3

0.06

20

0.36

11

0.20

Adjusted net (loss) income

$

(86

)

$

(1.54

)

$

33

$

0.58

$

28

$

0.50

$

154

$

2.78

________________________

(1)

Income tax effect of adjustments calculated at the statutory tax
rate of 37%.

The following are descriptions of the adjustments made to GAAP measures
used to calculate the non-GAAP measures used in this news release:

Earnings before interest, taxes, depreciation and amortization (EBITDA):
Net income (GAAP) less depreciation, and amortization of intangible
assets and capitalized software, interest expense and income tax
expense. We believe that EBITDA is particularly helpful in assessing our
ability to meet the cash demands of our operating units.

Adjusted net (loss) income: Net income (GAAP) less amortization
of intangible assets, net of income tax effect calculated at the
statutory tax rate of 37%. We believe that adjusted net income is very
helpful in assessing our financial performance exclusive of the non-cash
impact of the amortization of purchased intangibles.

Adjusted net (loss) income per diluted share: Adjusted net income
divided by weighted average common shares outstanding on a fully diluted
basis.

MOLINA HEALTHCARE, INC.

2017 OUTLOOK AND GUIDANCE

The following table presents the Company’s outlook for fiscal
year 2017:(1)

Premium revenue

$18.4B

Premium tax revenue

$460M

Service revenue

$570M

Investment income and other revenue

$40M

Total revenue

$19.5B

Medical care costs

$16.3B

Medical care ratio (2)

88.5%

Cost of service revenue

$520M

General and administrative expenses

$1.8B

G&A ratio (3)

9.0%

Premium tax expenses

$460M

Depreciation and amortization

$160M

Interest expense and other income

$100M

Income before income taxes

$175M

Net income

$100M

EBITDA (4)

$465M

Effective tax rate

44.0%

Net profit margin (3)

0.5%

Diluted weighted average shares

58.2M

Net income per share

$1.72

Adjusted net income per share (4)

$2.09

________________________

(1)

All amounts are estimates; actual results may differ materially.
Does not include Aetna/Humana Medicare transaction break-up fee. See
our risk factors as discussed in our Form 10-K and other filings.